life-cycle budget

Dictionary of Accounting Terms for: life-cycle budget

life-cycle budget

estimates of a product’s revenues and expenses over its entire life cycle beginning with research and development, proceeding through the introduction and growth stages, into the maturity stage, and finally into the harvest or decline stage. Lifecycle budgeting adopts a life-cycle costing approach. It is intended to account for the costs at all stages of the value chain (R&D, design, production, marketing, distribution, and customer service). This information is important for pricing decisions because revenues must cover costs incurred in each stage of the value chain, not just production. Life-cycle budgeting emphasizes the relationships among costs incurred at different value-chain stages, for example, the effect of reduced design costs on future customer-service costs.

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